To Part 8, or Not To Part 8 – That is the question.
We would all love for the work we carry out to complete without needing to trouble adjudicators, arbitrators, judges or any other referees but unfortunately, we live in the real world where real problems often lead to disputes between parties. In his first blog post for Beyond Corporate, Paralegal Adam Ayub looks at Part 8, the limited grounds upon which it can be used, and the consequences of misuse.
Construction projects are no different, although most construction disputes are referred to adjudication where the appointed adjudicator will make a binding decision that can be enforced by the successful party through the Courts.
But, what if you don’t agree with the adjudicator’s decision? Unsuccessful parties have increasingly been turning to the use of Part 8 court proceedings as a means of delaying or resisting the enforcement of an adjudicator’s award.
A recent case has however confirmed the limited grounds upon which Part 8 can be used, and the consequences for the misuse of a Part 8 claim to delay enforcement of an adjudicator’s decision.
In Breakshore Ltd v Red Key Concepts Ltd a dispute arose because the contractor (Red Key) suspended its works and left site, as it claimed the employer (Breakshore) had not obtained the necessary revised planning permissions relating to the increased height of the building.
An adjudication followed and the adjudicator found that Red Key was wrong to suspend its works, and should not have ceased working on the building, which it had already built higher than the already approved planning permission, without Breakshore’s approval. Red Key was therefore liable to pay almost £300,000.00 in LADs, plus the adjudicator’s costs.
Unsurprisingly, Red Key did not agree with the decision, and decided not only to resist enforcement but also to launch proceedings in the Technology and Construction Court using Civil Procedure Rule Part 8. Red Key claimed, as a part of its Part 8 claim, that due to Breakshore’s failure to discharge planning conditions, it was not possible for Red Key to achieve practical completion and therefore Red Key had been within its rights to suspend work, the adjudicator’s decision should be reversed by the Court, and a final determination granted in Red Key’s favour.
The declarations sought by Red Key as part of the Part 8 claim included:
- Breakshore was under an obligation to obtain an amendment to the planning permission appertaining to the revised height of the building;
- Red Key cannot achieve practical completion until the planning conditions have either been satisfied or discharged;
- As Breakshore did not satisfy or discharge the planning conditions they prevented Red Key from achieving practical completion, this act or omission is a relevant act under clause 2.26 of the contract and the date for completion of the works cannot be fixed under clause 2.25 of the contract unless Breakshaw rectifies this act or omission; and
- The adjudicator’s decision is unenforceable and should not be enforced by the court.
The Court however found that this was a misuse of the Part 8 procedure as the declarations being sought by Red Key were inappropriate. To provide the declarations requested, the Court would need to determine whether it was reasonable for Red Key to suspend its work and whether this was the actual cause of the delay to the project, which is in itself a question of fact and not a question of law.
In judgment the court cited Hutton Construction Ltd v Wilson Properties (London) Ltd which outlines that substantive issues cannot be determined in an adjudication enforcement hearing except in very limited circumstances, none of which applied in this case. The judge in Hutton laid out the following approach for determining whether this is those limited circumstances:
- There must be a short and self-contained issue which the defendant wishes to contest, of which arose in the adjudication.
- That issue requires no oral evidence or any other elaboration, other than that which is capable of being provided during a hearing to set aside enforcement.
- The issue is that of which on a summary judgement application, the court would find it unconscionable to ignore.
The court also cited CPR 8.1(2)(a), which states that “a Claimant may use the Part 8 procedure where (a) he seeks the court’s decision on a question which is unlikely to involve a substantial dispute of fact”.
Not only did the Court decide against Red Key and allow enforcement of the adjudicators decision, but it also ordered costs amounting to £77,000 on an indemnity basis for the inappropriate use of Part 8 as the Court took the view that this use of Part 8 was solely designed to delay the enforcement of payment due pursuant to an adjudicator’s award.
This approach taken by the court was a reminder that the TCC will not allow the misuse of a Part 8 claim as a way to prevent immediate enforcement of an adjudicator’s decision, and that the circumstances in which a Part 8 claim can be used to successfully reverse the award of an adjudicator are likely to continue to be limited.
By Adam Ayub